Arrow/schweber

Relationship with customers

Arrow operates with two kinds of customers, transactional and relational customers. The former are customers which placed requests for quotes for one or a few product with a large number of distributors, while the latter are steady partners for the company.

Transactional customer are price sensitive, thus sales people provide them with current pricing information and negotiate with them in order to offer them the best price. The majority of the sales are book and ship type. This customer segment is a major source of relational customers in the long run. Al least a half of them turn to be relational customers who give more attention to value added services rather than prices. This is the first step of building a strong relationship. They provide customer with the best - in class - support. Once customers get the chance to interact with Arrow, they are able to see the true benefit of doing business with them. Although other distributors offer to costumer value added services, Arrow provides to them everything they needed at the right time and in the right quantities.

Extremely important for Arrow is to find the right customers with which to develop long - term relationship. Helping them in their times of need is the best way to strengthen a relationship. They are looking for an unbreakable relationship as they need the customers to invest along with them in processes that enabled them to provide value added services.

How do they add value to their customers?

1.) Transaction Cost Reduction

* Total cost of Ownership Analysis - financial model based on ABC methodologies which helped companies identify the total cost associated with particular activities or processes.

* Automated replenishment - the system that could reduce inventory and carrying costs.

* Electronic Data Interchange (EDI) - integral part of value added services which support faster, more accurate information transfer reducing supply chain cost and improving productivity.

* In plants Terminals - witch enable Arrow's customer to check inventory availability, set up purchase orders and cross parts improving productivity and reducing acquisition costs.

2.) Planning the material Pipeline

* In - Plant Stores - responsible for planning, purchasing, receiving, stocking and fulfilling production through customer - premising warehouses.

* Turnkey Service - Arrow A/S provided complete management of customers' printed circuit board assembly requirements from prototype to production through a Turnkey Services.

3.) Improving logistical efficiency

* Production Kitting - which help to reduce stock outs components obsolescence, inventory carrying costs and other inventory related expenses.

* Device programming - which avoid costly capital equipment expenditures.

4.) Complete Supply Chain Management

* Business Needs Analysis - which evaluated customers' materials planning, acquisition and inventorying processes providing sustainable results reflected in the bottom line.

* Custom Computer Products (CCP) - which reduce production cost and time to market thereby enhancing customers' cash flow.

Value Added in this business through years

Value added (VA) was one of the most important components of A/S in dealing with customers. This was made possible through Field Sales Representatives (FRSs) and Sales Marketing Representatives (SMRs).

FSRs of A/S established relationships with customers' purchasing personnel, negotiated major contracts and resolved problems with the flow of orders and deliveries. They also collaborated with field application engineers (FAEs) who provided technical support. FRSs and SMRs who finalize the details of transaction with customers, were up to date on suppliers' latest products and marketing programs. The above information was passed to the customers continually.

The meaning of value added has continuously changed in Arrow business. In 1977, VA was nothing more than an inventory buffer for the customer. Ten years later it meant altering components to meet customer needs (programming, packaging etc). In 1997 VA meant building virtual organization between the most important customers and the company. Nowadays, the value added is a cycle management. Year by year the value added component in Arrow sales is increasing, capturing 80% in 2000.

Relationship with suppliers and the role of franchised distributors

Motorola and Intel were two of the major supplier of Arrow. Generally, Arrow's relationship with them had two unique components.

* Suppliers select franchise distributors to sell their products providing financial incentives (price protection) and products' warranties only to these franchise distributors. The latter afforded customers the opportunity to order in small quantities and with short lead times something that suppliers were unwilling to provide. They also performed value added services for customer who needed this.

* They have total control on distributors. The suppliers know exactly what the distributor is doing, having in this way control to prices.

When the distributor is involved in the design work according to the costumer parameters of products we have a design win. The distributor finds an opportunity, invest resources on the customer project and inform the supplier about the details. This is called design registration from where the distributors get discounts.

Customers that purchases on the basis of manufacture reputation or price and did not involve a distributor in design work are called "jump balls" in the business. In this case the supplier offers the same margin for all the distributors witch is definitely lower than in the case of design wins.

Suppliers control the distributors as following:

* Suppliers inform the customers about the various distributors they can buy from having total control in the order of names they put first in list.

* They manage the demand flow from the order in which they inform the distributors about an opportunity.

* They